HomeStreet, Inc. (Nasdaq: HMST) (including its consolidated
subsidiaries, the "Company", "HomeStreet" or "we"), the parent
company of HomeStreet Bank, today announced the financial results
for the quarter ended and year ended December 31, 2023. As we
present non-GAAP measures in this release, the reader should refer
to the non-GAAP reconciliations set forth below under the section
“Non-GAAP Financial Measures.”
“On January 16, 2024, FirstSun Capital Bancorp (“FirstSun”), the
holding company of Sunflower Bank, and HomeStreet jointly announced
that they have entered into a definitive merger agreement whereby
HomeStreet and HomeStreet Bank will merge with and into FirstSun
and Sunflower Bank, respectively, with HomeStreet Bank continuing
to operate under its tradename in its current markets,” said Mark
Mason, Chairman of the Board, President, and Chief Executive
Officer. “Under the terms of the agreement, the companies will
combine in an all-stock transaction in which HomeStreet
shareholders will receive 0.4345 of a share of FirstSun common
stock for each share of HomeStreet common stock. The common stock
of FirstSun is expected to be listed on Nasdaq prior to closing. We
are excited about this merger because we believe this merger is
strategically compelling, will meaningfully enhance shareholder
value, will improve our customers’ experience and create new and
better opportunities for our employees enabling us to retain and
attract top talent.”
Fourth Quarter
Operating Results
Fourth quarter 2023 compared
to third quarter 2023
Reported Results:
- Net income (loss): $(3.4) million compared to $2.3 million
- Earnings (loss) per fully diluted share: $(0.18) compared to
$0.12
- Return on Average Equity ("ROAE"): (2.6)% compared to 1.7%
- Return on Average Tangible Equity ("ROATE"): (1.3)% compared to
2.2%
- Return on Average Assets ("ROAA"): (0.15)% compared to
0.10%
- Net interest margin: 1.59% compared to 1.74%
- Efficiency ratio: 105.9% compared to 98.3%
Full Year Operating
Results
2023 compared to 2022
Reported Results:
- Net income (loss): $(27.5) million compared to $66.5
million
- Earnings (loss) per fully diluted share: $(1.46) compared to
$3.49
- ROAE: (5.0)% compared to 10.8%
- ROAA: (0.29)% compared to 0.79%
- Net interest margin: 1.88% compared to 2.99%
- Efficiency ratio: 95.6% compared to 72.4%
Core Results:(1)
- Net income: $8.3 million compared to $66.5 million
- Net income per fully diluted share: $0.44 compared to
$3.49
- ROATE: 2.0% compared to 11.5%
- ROAA: 0.09% compared to 0.79%
(1)
Core net income, core net income per fully
diluted share, return on average tangible equity and core return on
average assets are non-GAAP measures. For a reconciliation to the
nearest comparable GAAP measure see "Non-GAAP financial measures"
in this earnings release.
“In the fourth quarter, our results continued to be impacted by
increased funding costs as lower cost deposits continued to migrate
to higher yielding products, both ours and at other institutions, ”
continued Mark Mason. “As a result, our net interest margin
decreased from 1.74% in the third quarter of 2023 to 1.59% in the
fourth quarter of 2023. A $4.5 million increase in our funding
costs were only partially offset by $0.6 million increase in
interest income earned on our assets. In addition, our self-insured
employee medical expenses were $1.8 million higher in the fourth
quarter as compared to the third quarter due to an increase in the
total number of claims and claims in excess of $100,000. This
unusual increase in employee medical expenses is not expected to
recur. We also incurred $1.5 million in merger related costs.”
“While interest rates have stabilized and are projected to
decline later in the year, we expect our operating results will
continue to be adversely impacted by high funding costs relative to
earning assets yields in the near term,” added Mark Mason. “We also
expect to incur costs related to the merger process, and incur
annual wage increases beginning in March 2024. Additionally, annual
seasonal increases and decreases in mortgage loan production
related compensation expenses coinciding with the annual homebuying
season are expected to continue.”
Financial Position
As of and for the quarter
ended December 31, 2023
- Uninsured deposits were $485 million, or 7% of total
deposits
- Excluding brokered deposits, total deposits decreased $227
million
- Loans held for investment ("LHFI"), remained stable
- Nonperforming assets to total assets: 0.45%
- Allowance for credit losses to LHFI: 0.55%
- Book value per share: $28.62
- Tangible book value per share: $28.11
“The decline in deposits during the fourth quarter was primarily
due to the continued migration of lower yielding deposits to higher
yielding alternatives, including money market funds, Treasury Bonds
and other bank's promotional deposit products,” stated Mark Mason.
“We did see this trend moderate somewhat as deposits (excluding
brokered deposits), increased by over $40 million during December
2023. With the lower levels of interest rates at year-end, our
Accumulated Other Comprehensive Loss decreased by $40 million in
comparison to September 30, 2023, increasing our tangible book
value by over $2 per share.”
“In light of the pending merger with FirstSun and the net loss
realized in the fourth quarter, the Company made the decision to
not pay a dividend to its shareholders in the first quarter,” added
Mark Mason.
About HomeStreet
HomeStreet, Inc. (Nasdaq: HMST) is a diversified financial
services company headquartered in Seattle, Washington, serving
consumers and businesses in the Western United States and Hawaii.
The Company is principally engaged in real estate lending,
including mortgage banking activities, and commercial and consumer
banking. Its principal subsidiary is HomeStreet Bank. HomeStreet
Bank is the winner of the 2022 "Best Small Bank" in Washington
Newsweek magazine award. Certain information about our business can
be found on our investor relations web site, located at
http://ir.homestreet.com. HomeStreet Bank is a member of the FDIC
and is an Equal Housing Lender.
About FirstSun Capital Bancorp
FirstSun Capital Bancorp, (OTCQX: FSUN) headquartered in Denver,
Colorado, is the financial holding company for Sunflower Bank,
headquartered in Dallas, Texas, and which also operates under the
brands First National 1870 and Guardian Mortgage. Sunflower Bank
provides a full range of relationship-focused services to meet
personal, business and wealth management financial objectives, with
a branch network in Texas, Kansas, Colorado, New Mexico, and
Arizona and mortgage capabilities in 43 states. FirstSun had total
consolidated assets of $7.9 billion as of December 31, 2023.
Forward-Looking Statements
This earnings release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995
(the “Reform Act”). Generally, forward-looking statements include
the words “anticipate,” “believe,” “estimate,” “expect,” “intend,”
“may,” “plan,” “potential,” “goal,” “upcoming,” “outlook,”
“guidance” or the negation thereof, or similar expressions. In
addition, all statements in this earnings release (including but
not limited to those found in the quotes of our Chief Executive
Officer) that address and/or include beliefs, assumptions,
estimates, projections and expectations of the anticipated benefits
of the previously announced proposed merger (the “Merger”) with
FirstSun Capital Bancorp (“FirstSun”), our future performance,
financial condition, long-term value creation, capital management,
reduction in volatility, reliability of earnings, net interest
margins, provisions and allowances for credit losses, cost
reduction initiatives, performance of our continued operations
relative to our past operations, and restructuring activities are
forward-looking statements within the meaning of the Reform Act.
Forward-looking statements involve inherent risks, uncertainties
and other factors, many of which are difficult to predict and are
generally beyond management’s control. Forward-looking statements
are based on the Company’s expectations at the time such statements
are made and speak only as of the date made. The Company does not
assume any obligation or undertake to update any forward-looking
statements after the date of this release as a result of new
information, future events or developments, except as required by
federal securities or other applicable laws, although the Company
may do so from time to time. The Company does not endorse any
projections regarding future performance that may be made by third
parties. For all forward-looking statements, the Company claims the
protection of the safe harbor for forward-looking statements
contained in the Reform Act.
We caution readers that actual results may differ materially
from those expressed in or implied by the Company’s forward-looking
statements. Rather, more important factors could affect the
Company’s future results, including but not limited to the
following:(1) our ability to successfully consummate the Merger
with FirstSun, (2) the ability of HomeStreet to obtain the
necessary approval by shareholders with respect to the Merger, (3)
the ability of HomeStreet and FirstSun to obtain required
governmental approvals of the Merger, (4) the failure to satisfy
the closing conditions in the definitive Agreement and Plan of
Merger (the “Merger Agreement”), dated as of January 16, 2024, by
and between HomeStreet and FirstSun, or any unexpected delay in
closing the Merger, (5) the ability to achieve expected cost
savings, synergies and other financial benefits from the Merger
within the expected time frames and costs or difficulties relating
to integration matters being greater than expected, (6) the
diversion of management time from core banking functions due to
Merger-related issues; (7) potential difficulty in maintaining
relationships with customers, associates or business partners as a
result of the announced Merger, (8) changes in the U.S. and global
economies, including business disruptions, reductions in
employment, inflationary pressures and an increase in business
failures, specifically among our customers; (9) changes in the
interest rate environment may reduce interest margins; (10) changes
in deposit flows, loan demand or real estate values may adversely
affect the business of our primary subsidiary, HomeStreet Bank (the
“Bank”), through which substantially all of our operations are
carried out; (11) there may be increases in competitive pressure
among financial institutions or from non-financial institutions;
(12) our ability to attract and retain key members of our senior
management team; (13) the timing and occurrence or non-occurrence
of events may be subject to circumstances beyond our control; (14)
our ability to control operating costs and expenses; (15) our
credit quality and the effect of credit quality on our credit
losses expense and allowance for credit losses; (16) the adequacy
of our allowance for credit losses; (17) changes in accounting
principles, policies or guidelines may cause our financial
condition to be perceived or interpreted differently; (18)
legislative or regulatory changes that may adversely affect our
business or financial condition, including, without limitation,
changes in corporate and/or individual income tax laws and
policies, changes in privacy laws, and changes in regulatory
capital or other rules, and the availability of resources to
address or respond to such changes; (19) general economic
conditions, either nationally or locally in some or all areas in
which we conduct business, or conditions in the securities markets
or banking industry, may be less favorable than what we currently
anticipate; (20) challenges our customers may face in meeting
current underwriting standards may adversely impact all or a
substantial portion of the value of our rate-lock loan activity we
recognize; (21) technological changes may be more difficult or
expensive than what we anticipate; (22) a failure in or breach of
our operational or security systems or information technology
infrastructure, or those of our third-party providers and vendors,
including due to cyber-attacks; (23) success or consummation of new
business initiatives may be more difficult or expensive than what
we anticipate; (24) our ability to grow efficiently both
organically and through acquisitions and to manage our growth and
integration costs; (25) staffing fluctuations in response to
product demand or the implementation of corporate strategies that
affect our work force and potential associated charges; (26)
litigation, investigations or other matters before regulatory
agencies, whether currently existing or commencing in the future,
may delay the occurrence or non-occurrence of events longer than
what we anticipate; (27) our ability to obtain regulatory approvals
or non-objection to take various capital actions, including the
payment of dividends by us or the Bank, or repurchases of our
common stock; and (28) the integration of our recently acquired
branches in southern California. A discussion of the factors, risks
and uncertainties that could affect our financial results, business
goals and operational and financial objectives cited in this
release, other releases, public statements and/or filings with the
Securities and Exchange Commission (“SEC”) is also contained in the
“Risk Factors” sections of the Company's Forms 10-K and 10-Q. We
strongly recommend readers review those disclosures in conjunction
with the discussions herein.
All future written and oral forward-looking statements
attributable to the Company or any person acting on its behalf are
expressly qualified in their entirety by the cautionary statements
contained or referred to above. New risks and uncertainties arise
from time to time, and factors that the Company currently deems
immaterial may become material, and it is impossible for the
Company to predict these events or how they may affect the
Company.
Additional Information And Where To Find It
In connection with the proposed Merger between FirstSun, a
Delaware corporation, and HomeStreet, a Washington corporation,
FirstSun will file with the Securities and Exchange Commission (the
“SEC”) a Registration Statement on Form S-4 that will include a
Proxy Statement of HomeStreet and a Prospectus of FirstSun, as well
as other relevant documents concerning the proposed transaction.
Investors and security holders, prior to making any investment or
voting decision, are urged to read the registration statement and
proxy statement/prospectus when it becomes available (and any other
documents filed with the SEC in connection with the Merger or
incorporated by reference into the proxy statement/prospectus)
because such documents will contain important information regarding
the Merger.
Investors and security holders may obtain free copies of these
documents and other documents filed with the SEC on its website at
www.sec.gov. Investors and security holders may also obtain free
copies of the documents filed with the SEC by (i) FirstSun on its
website at
https://ir.firstsuncb.com/investor-relations/default.aspx, and (ii)
HomeStreet on its website at
https://ir.homestreet.com/sec-filings/all-filings/default.aspx.
This communication does not constitute an offer to sell or the
solicitation of an offer to buy any securities or a solicitation of
any vote or approval nor shall there be any sale of securities in
any jurisdiction in which such offer, solicitation, or sale would
be unlawful prior to registration or qualification under the
securities laws of such jurisdiction.
FirstSun, HomeStreet and certain of their directors and
executive officers may be deemed participants in the solicitation
of proxies from shareholders of HomeStreet in connection with the
proposed Merger. Information regarding the directors and executive
officers of FirstSun and HomeStreet and other persons who may be
deemed participants in the solicitation of the shareholders of
HomeStreet in connection with the proposed Merger will be included
in the proxy statement/prospectus for HomeStreet’s special meeting
of shareholders, which will be filed by FirstSun with the SEC.
Information about the directors and officers of FirstSun and their
ownership of FirstSun’s common stock can be found in FirstSun’s
annual report on Form 10-K, as filed with the SEC on March 16,
2023, and other documents subsequently filed by FirstSun with the
SEC. Information about the directors and officers of HomeStreet and
their ownership of HomeStreet’s common stock can be found in
HomeStreet’s definitive proxy statement in connection with its 2023
annual meeting of shareholders, as filed with the SEC on April 11,
2023, and other documents subsequently filed by HomeStreet with the
SEC. Additional information regarding the interests of such
participants will be included in the proxy statement/prospectus and
other relevant documents regarding the proposed Merger filed with
the SEC when they become available.
HomeStreet, Inc. and Subsidiaries Non-GAAP Financial
Measures
To supplement our unaudited condensed consolidated financial
statements presented in accordance with GAAP, we use certain
non-GAAP measures of financial performance.
In this earnings release, we use the following non-GAAP
measures: (i) tangible common equity and tangible assets as we
believe this information is consistent with the treatment by bank
regulatory agencies, which exclude intangible assets from the
calculation of capital ratios; (ii) core income and effective tax
rate on core income before taxes, which excludes goodwill
impairment charges and merger related expenses and the related tax
impact as we believe this measure is a better comparison to be used
for projecting future results and (iii) an efficiency ratio which
is the ratio of noninterest expense to the sum of net interest
income and noninterest income, excluding certain items of income or
expense and excluding taxes incurred and payable to the state of
Washington as such taxes are not classified as income taxes and we
believe including them in noninterest expense impacts the
comparability of our results to those companies whose operations
are in states where assessed taxes on business are classified as
income taxes.
These supplemental performance measures may vary from, and may
not be comparable to, similarly titled measures provided by other
companies in our industry. Non-GAAP financial measures are not in
accordance with, or an alternative for, GAAP. Generally, a non-GAAP
financial measure is a numerical measure of a company’s performance
that either excludes or includes amounts that are not normally
excluded or included in the most directly comparable measure
calculated and presented in accordance with GAAP. A non-GAAP
financial measure may also be a financial metric that is not
required by GAAP or other applicable requirements.
We believe that these non-GAAP financial measures, when taken
together with the corresponding GAAP financial measures, provide
meaningful supplemental information regarding our performance by
providing additional information used by management that is not
otherwise required by GAAP or other applicable requirements. Our
management uses, and believes that investors benefit from referring
to, these non-GAAP financial measures in assessing our operating
results and when planning, forecasting and analyzing future
periods. These non-GAAP financial measures also facilitate a
comparison of our performance to prior periods. We believe these
measures are frequently used by securities analysts, investors and
other parties in the evaluation of companies in our industry. These
non-GAAP financial measures should be considered in addition to,
not as a substitute for or superior to, financial measures prepared
in accordance with GAAP. In the information below, we have provided
reconciliations of, where applicable, the most comparable GAAP
financial measures to the non-GAAP measures used in this earnings
release, or a reconciliation of the non-GAAP calculation of the
financial measure.
HomeStreet, Inc. and Subsidiaries Non-GAAP Financial
Measures
Reconciliations of non-GAAP results of operations to the nearest
comparable GAAP measures or calculations of the non-GAAP
measure:
As of or for the Quarter
Ended
Year Ended
(in thousands, except share and per share
data)
December 31,
2023
December 31,
2022
December 31,
2023
December 31,
2022
Core net income (loss)
Net income (loss)
$
(3,419
)
$
2,295
$
(27,508
)
$
66,540
Adjustments (tax effected)
Merger related expenses
1,170
—
1,170
—
Goodwill impairment charge
—
—
34,622
—
Total
$
(2,249
)
$
2,295
$
8,284
$
66,540
Core net income (loss) per fully diluted
share
Fully diluted shares
18,807,965
18,792,893
18,783,005
19,041,111
Computed amount
$
(0.12
)
$
0.12
$
0.44
$
3.49
Return on average tangible equity
(annualized)
Average shareholders' equity
$
513,758
$
535,369
$
552,234
$
617,469
Less: Average goodwill and other
intangibles
(10,149
)
(10,917
)
(25,695
)
(30,930
)
Average tangible equity
$
503,609
$
524,452
$
526,539
$
586,539
Core net income (loss) (per above)
$
(2,249
)
$
2,295
$
8,284
$
66,540
Adjustments (tax effected)
Amortization of core deposit
intangibles
615
614
2,302
751
Tangible income (loss) applicable to
shareholders
$
(1,634
)
$
2,909
$
10,586
$
67,291
Ratio
(1.3
)%
2.2
%
2.0
%
11.5
%
Efficiency ratio
Noninterest expense
Total
$
49,511
$
49,089
$
241,872
$
205,419
Adjustments:
Merger related expenses
(1,500
)
—
(1,500
)
—
Goodwill impairment
—
—
(39,857
)
—
State of Washington taxes
659
(572
)
(994
)
(2,311
)
Adjusted total
$
48,670
$
48,517
$
199,521
$
203,108
Total revenues
Net interest income
$
34,989
$
38,912
$
166,753
$
233,307
Noninterest income
10,956
10,464
41,921
51,570
Gain on sale of branches
—
—
—
(4,270
)
Adjusted total
$
45,945
$
49,376
$
208,674
$
280,607
Ratio
105.9
%
98.3
%
95.6
%
72.4
%
Return on average assets (annualized) -
Core
Average Assets
$
9,351,866
$
9,433,648
$
9,469,170
$
8,396,078
Core net income (loss) (per above)
(2,249
)
2,295
—
8,284
66,540
Ratio
(0.10
)%
0.10
%
0.09
%
0.79
%
Tangible book value per share
Shareholders' equity
$
538,387
$
502,487
$
538,387
$
562,147
Less: Goodwill and other intangibles
(9,641
)
(10,429
)
(9,641
)
(29,980
)
Tangible shareholders' equity
$
528,746
$
492,058
$
528,746
$
532,167
Common shares outstanding
18,810,055
18,794,030
18,810,055
18,730,380
Computed amount
$
28.11
$
26.18
$
28.11
$
28.41
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240129680740/en/
Executive Vice President and Chief Financial Officer
HomeStreet, Inc. John Michel (206) 515-2291
john.michel@homestreet.com http://ir.homestreet.com
HomeStreet (NASDAQ:HMST)
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